Pakistan Automotive Sector Seeks Immediate Policy Reforms

In the face of challenging times for the automotive sector, industry analysts and pundits are calling upon policymakers in Pakistan to enact a paradigm shift to breathe new life into the industry. A range of proposals have been put forth by experts, emphasizing the need for sustained policies, quality control measures, tax reductions, and support for small and medium-sized enterprises (SMEs) to enhance exports.

Abdul Rehman Aizaz, Chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), emphasized the importance of zero-duty imports for raw materials and the elimination of regulatory duties. Aizaz contends that such measures would ensure the availability of essential raw materials at competitive prices, aligning with regional competitors like India, China, and Turkey. He stressed the urgency of consistent policies and incentives for original equipment manufacturers (OEMs) to foster meaningful localization, asserting that macroeconomic challenges have left Pakistan trailing behind its neighbors in various industries.

Aizaz highlighted the burden of taxes on the industry, with nearly 40% of vehicle costs attributed to taxes. This heavy tax load, according to Aizaz, results in low production volumes and places automobiles out of reach for the average citizen. He noted the capital-intensive nature of the automotive sector and the need for increased volumes to sustain growth, pointing out that Pakistan lags behind in car usage per capita compared to its regional counterparts. Aizaz also criticized the state of engineering education and the excessive number of government-funded PhDs that contribute little to industrial development.

Murtaza Mandviwala, an author and automotive expert, called for the formulation of an automotive export strategy in collaboration with stakeholders. He emphasized the need to focus on exporting automotive parts rather than finished passenger cars, citing the challenges posed by import duty structures on raw materials and components.

Dr. Aadil Nakhoda, an analyst and researcher, proposed initiatives to boost exports, encourage SME participation, remove bureaucratic trade hurdles, and digitize trade procedures through the Pakistan Single Window (PSW). Nakhoda urged a reduction in import tariffs to eliminate anti-export bias and ensure currency movement aligned with expectations, enabling businesses to engage in international trading activities with reduced risks.

Nakhoda emphasized the importance of improving linkages between imports and exports, attributing the balance of payments crisis to a lack of productivity in Pakistan. He highlighted the need for local industries to enhance quality and competitiveness through innovation and a more outward-looking focus.

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